Budget 2012 Changes to Student Loans and Allowances

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1 Budget 2012 Changes to Student Loans and Allowances On 24 May the Government announced changes to Student Loans and Student Allowances as part of Budget The changes are: The Student Allowance will no longer be available for postgraduate study (except Bachelor degrees with honours). Exemptions to the 200 week lifetime limit for Student Allowance will be removed. The current Student Allowance parental income threshold of $55, will be maintained without CPI adjustment until 31 March Pilot training students will be limited to borrowing up to $35,000 per EFTS from the compulsory fees component of the Student Loan. Student Loan borrowing will be limited to 2 EFTS of study each year. The following changes were also announced that will affect students when they start repaying their loan: From 1 April 2013, the Student Loan repayment rate for all New Zealand-based borrowers earning over the repayment threshold will be increased to 12 cents in the dollar. The voluntary repayment bonus will be removed from 1 April The information match between Inland Revenue and the New Zealand Customs Service will be extended to identify Student Loan borrowers in serious default so Inland Revenue can immediately initiate contact with the borrower. The definition of income for Student Loan repayment purposes will be broadened to include a wider range of income types, from 1 April In addition, the following changes from Budget 2011 will be implemented in 2013: People aged 55 and over will only be eligible for the compulsory fees component of the Student Loan for study that starts on or after 1 January Students won t be able to borrow through the Student Loan Scheme if they have $500 or more in default at the time of their application, and that at least some portion of that amount has been overdue for a year or more. This applies to all new Student Loan applications received on or after 7 February All students applying for a new Student Loan for study that starts on or after 1 January 2013 will be required to nominate a New Zealand-based contact person as a condition of accessing the Student Loan Scheme. V1.0 May 2012 Page 1 of 6

2 Student Allowance changes for postgraduate study The Student Allowance will no longer be available for postgraduate study (level 8 and above) that starts on or after 1 January Bachelor degrees with honours will remain eligible for Student Allowance. Students who have been receiving a Student Allowance for postgraduate study with a partner or child/ren are able to continue receiving a Student Allowance for up to one year, until 31 December 2013, or until they use up their 200 week lifetime entitlement to Student Allowance, whichever comes first. The student must be continuing the same qualification. Students do not need to do anything to qualify for this exemption. Postgraduate students can continue to access Student Loans to finance their study. Depending on their personal circumstances they may qualify for further assistance from the Accommodation Supplement. Exemptions to the 200 week lifetime limit for Student Allowance will be removed All exemptions to the 200 week limit for Student Allowance will be removed from 1 January 2013, except for special circumstances. Extensions will no longer be available for Recognised Long Programmes, equivalent long programmes and retraining for National Interest (currently only teacher training). Students who will reach their 200 week entitlement during 2012 and apply for an extension before 31 December 2012 will continue to be eligible for the extension until the end of their approved extension period. Students may be eligible to extend their Student Allowance beyond the 200 week limit if they have special circumstances outside of their control. Students can only apply for an exemption in 2012 if their 200 week limit will be reached in Maintaining the Student Allowance parental income threshold at the current limit The current Student Allowance parental income threshold of $55, will be maintained without CPI adjustment until 31 March Student Allowance rates and personal and joint income thresholds will continue to be reviewed on 1 April each year. V1.0 May 2012 Page 2 of 6

3 Student Loan borrowing limits for pilot training students Pilot training students will be limited to borrowing up to $35,000 per EFTS from the compulsory fees component of the Student Loan. The amount of fees that a student can borrow is relative to the EFTS they are enrolled in. This means if a student is enrolled in 0.5 EFTS they will only be able to borrow $17,500 for their compulsory fees. Existing pilot training students who have been enrolled (but not necessarily accessed the Student Loan Scheme) on a pilot training course at any time between 1 January 2009 and 31 December 2012 will continue to have access to their full compulsory fees while they complete their qualification. Student Loan annual borrowing limits Student Loan borrowing will be limited to 2 EFTS of study each year. A year of full-time study is usually between 0.8 EFTS and 1.2 EFTS, which means that this change will impact on students with heavy workloads or those who change courses during the year. Changes to Student Loan repayments Student Loan repayment rate New Zealand-based Student Loan borrowers currently have a repayment obligation of 10 cents for every dollar of income over the repayment threshold, which is set at $367 per week or $19,084 annually. From 1 April 2013 the repayment rate will increase to 12 cents in the dollar for every dollar of income over the repayment threshold. Voluntary repayment bonus Currently students who make voluntary payments to Inland Revenue of $500 or more within a tax year on top of their Student Loan repayment obligations may qualify for an additional 10% bonus that is credited to their loan account. The voluntary repayment bonus will be removed from 1 April Information match between Inland Revenue and the New Zealand Customs Service The information match will be extended to enable the New Zealand Customs Service to identify Student Loan borrowers in serious default immediately when they enter and leave the country. The New Zealand Customs Service will transfer borrower s contact details quickly to Inland Revenue who will use them to immediately make contact with the borrower and assist them to comply with their Student Loan obligations. V1.0 May 2012 Page 3 of 6

4 Definition of income for Student Loan repayment purposes The Student Loan Scheme is an income-contingent scheme meaning that the amount that a borrower has to repay in any year is dependent on the borrower s income from salary and wages, interest and dividends and other income such as business profits. However, for borrowers who derive other types of income, the current definition of income may not reflect their actual earnings or financial resources that are available to meet their repayment obligation. From 1 April 2014, it is proposed the following types of income will be included as income in order to determine a borrower s repayment obligation: Attributed company income. Attributed trust income. Major fringe benefits received by shareholder-employees in closely held companies. Unlocked portfolio investment entity income. Tax exempt salary and wages and certain overseas pensions. Main income equalisation scheme deposits. 50% of non-taxable private pensions and annuities. Distributions from superannuation schemes that relate to contributions made by a person s employer within the last two years, when the person has not retired (excluding KiwiSaver and locked-in superannuation schemes). Distributions from a retirement savings scheme when the person has retired early. Distributions from a trust, not being beneficiary income, where the recipient is not the settlor. It is proposed that a borrower who receives income from any of the sources listed above will need to include that income to determine their repayment obligation. For some borrowers this will increase their obligation. For other borrowers it may have the effect of establishing an obligation where previously there was none. V1.0 May 2012 Page 4 of 6

5 Changes announced in Budget 2011 Student Loan changes for students aged 55 years and over From 1 January 2013, people aged 55 years and over will no longer be eligible for living costs or course-related costs. They will only be eligible for the compulsory fees component of the Student Loan. Students who were over 55 as at the announcement date (19 May 2011), or are 55 and over as at 1 January 2013, will continue to be eligible for all components of the Student Loan for the qualification they were enrolled in on the date of the announcement (19 May 2011), until they complete this qualification or until 1 January 2015, whichever is earlier. There is no change to Student Allowance eligibility or criteria for these students. Those aged 55 years and over will continue to be eligible for a Student Allowance provided they meet all other criteria. Students are not eligible for a Student Allowance or Student Loan living costs if they are receiving support through New Zealand Superannuation or Veterans Pension. Changes to Student Loan eligibility for those with overdue repayment obligations From 7 February 2013, borrowers won t be able to borrow through the Student Loan Scheme if they have $500 or more in default at the time of their application, and that at least some portion of that amount has been overdue for a year or more. This applies to all new Student Loan applications received on or after 7 February To qualify for a Student Loan again students will need to reduce any outstanding repayment obligation to under $500 and reapply for a Student Loan. This will apply to all new applications made from 7 February Requirement to nominate a contact person for new Student Loan applications For study starting on or after 1 January 2013, all students applying for a new Student Loan will be required to nominate a New Zealand-based contact person as a condition of accessing the Student Loan Scheme. They will need to provide a contact name and phone number as well as an address and/or address. This will allow Inland Revenue to make contact with an alternative person to try and get the borrower s up-to-date contact details if they have not met their repayment obligations. V1.0 May 2012 Page 5 of 6

6 Need more information? Our website has more information on the changes to Student Loans and Allowances. For more information on education-related initiatives announced in the 2012 Budget visit the Ministry of Education website at For specific enquiries please contact StudyLink s helpdesk on or us at StudyLink_ChangeSupport@msd.govt.nz. The next edition of StudyLink News will provide you with an update on the changes and information about upcoming stakeholder meetings. V1.0 May 2012 Page 6 of 6